Question

17. If a nation restricts imports, it will:
A)   decrease the total value of goods and services produced in that nation.
B)   benefit each individual citizen in that nation.
C)   harm each individual citizen in that nation.
D)   increase the total value of goods and services produced in that nation.

18. Amy can produce either 5000 pounds of cheese or 20 cars per year. Mike can produce either 5000 pounds of cheese or 10 cars per year. If both Amy and Mike produce the good in which they have comparative advantage, the total annual output of this economy will be ______.

A) 30 cars B ) 5,000 pounds of cheese and 20 cars C) 10,000 pounds of cheese and 30 cars D) 10,000 pounds of cheese

19. If the price of a good in a closed economy is greater than the world price, then if the country opens its markets to world trade the country will be a ____ of that good.

A) net exporter B) producer C) net importer   D) importer and exporter

20. A legal limit on the quantity of a good that may be imported is called a(n) ____.

A) import tax   B) trade limit   C) quota   D) tariff

Answer 1

17). A)   decrease the total value of goods and services produced in that nation.

Trade restrictions are typically undertaken in an effort to protect companies and workers in the home economy from the competition by foreign firms. A protectionist policy is one in which a country restricts the importation of goods and services produced in foreign countries.

18). B ) 5,000 pounds of cheese and 20 cars

The opportunity cost of Amy producing Car is 5000 / 20 = 250

cheese and for Mike, it is 5000 / 10 = 500

cheese as Amy can produce it at a lower cost than she has a comparative advantage in the production of Car and Mike can produce cheese, total output in the economy will be 5000 cheese and 20 cars.

19). C) net importer

A net importer is a country or territory whose value of imported goods and services is higher than its exported goods and services over a given period of time. A net importer, by definition, runs a current account deficit in the aggregate.

20). C) quota

A quota is a government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period. Countries use quotas in international trade to help regulate the volume of trade between them and other countries.